Detroit becomes Largest U.S. City to Declare Bankruptcy

Once the nation’s fourth largest city, Detroit has reached a new low after decades in economic decline, becoming the largest U.S. city ever to file for bankruptcy.

The decision by Republican Governor Rick Snyder also gave Detroit the distinction of being the largest municipal bankruptcy filing in American history in terms of debt. The city owes an estimated $18 billion.

“This is a difficult step, but the only viable option to address a problem that has been six decades in the making,” Snyder told The New York Times. Snyder leads a mostly white Republican state government that is imposing economic policy on a city that is overwhelmingly black and Democratic. He seized effective control of the Detroit government in February and appointed an emergency manager, Kevyn Orr.

On Friday, one day after Snyder’s declaration, Ingham County Judge Rosemarie Aquilina ruled that his action was unconstitutional because it automatically cut the pension benefits of retired state employees, which are protected by state law. Snyder’s administration immediately appealed Aquilina’s decision.

City officials tried for weeks to avoid such a drastic measure through negotiations. But after failing to convince creditors to accept pennies on the dollar and unions to accept cuts in benefits, Snyder claimed he had no other choice.

The once-mighty Motor City began losing jobs and businesses as the automotive industry weakened over several decades. In 1950, Detroit had a population of 1.8 million. Since then, it has lost more than half of its residents, and is now down to 700,000.

What it does have is plenty of abandoned buildings, vacant lots and unlit streets numbering in the tens of thousands. The city’s unemployment rate has nearly tripled since 2000 and is more than double the national average. Its homicide rate is at the highest level in nearly 40 years, and Detroit police take an average of 58 minutes to respond to calls. In addition, about 40% of the city’s streetlights don’t work and more than half of its parks have closed in the last five years.